Firms gear for upturn

http://www.straitstimes.com/Breaking...ry_337389.html

Feb 12, 2009

Firms gear for upturn


HAMBURG (Germany) - WITH economic doom in every headline, export-led businesses here are preparing for the end. Hamburg shipyard worker Sebastian Kerzel says he and his colleagues are working flat out.

'Since the economic crisis began, we've been really busy. New orders keep coming in,' said the 27-year-old machine worker at a ship construction and repair plant in Hamburg, Germany's biggest port. 'We're at full stretch. There've been no cuts to working hours,' smiled Mr Kerzel, one of a stream of workers pouring out of shipyards here at the end of their shift.

Business is terrible for Hamburg, Europe's second-biggest container port after Rotterdam which handles around 10 per cent of Germany's foreign trade especially with China and Russia. But many German companies are emphasising the need to be ready to cope with increased demand once the world economy picks up again.

'As management we need to be bold and make further, targeted investments in these difficult times,' said Manfred Kuhr, deputy chairman of BLG Logistics Group, which handles 80 per cent of the goods at the port of Bremerhaven.

Industry orders for Germany, which has been the world's biggest exporter of goods since 2003, in December posted their biggest annual decline since reunification as demand for manufactured goods continued to slide.

Shipyards typically lag behind the cycle and VSM, the German shipbuilding association, says new orders have eased after production hit a record high last year. But it adds that suppliers to the shipbuilding industry are particularly busy.

Even if the recession is shaping up to be Germany's deepest since World War Two and export-led economy Germany may be, as UBS analysts put it in a Jan 28 note, 'in the middle of a perfect storm", some in the eye of that storm see opportunity.

BLG's Kuhr in Bremerhaven is exposed to one of the toughest sectors: it is Germany's biggest port for importing and exporting autos, sales of which have slumped by nearly one quarter globally. 'I can't remember us having a downturn like this,' Mr Kuhr said. 'I've been in the business for 35 years - we haven't had anything like this before.'

But even though business volumes are down, he expects the downturn to bottom out in the middle of this year, and says BLG is investing in car-transport infrastructure in Russia.

Hints of recovery

There are already some possibly unreliable hints a recovery is on the horizon, or at least that the downturn is reaching a low-point.

In January, German corporate morale measured by the Munich-based Ifo economic institute's business climate index rose for the first time in eight months, lifted by improving business expectations.

On Tuesday, the Baltic Dry Freight Index, the Baltic Exchange's leading shipping index and a volatile gauge of prices to ship commodities like iron ore, coal and grain on major export routes, rose by more than 8 per cent to a four-month high.

'The scenario is not that good for 2009 but it is also not that terribly bad,' said Juergen Sorgenfrei, chairman of Port of Hamburg Marketing, which compiles statistics on the port and is backed by the city authorities and port operators. The port authorities are planning infrastructure investments after booming business in recent years resulted in bottlenecks. 'We need to be ready (for a recovery),' said Mr Sorgenfrei.

Bargains

Thomas Straubhaar, director of the Hamburg-based HWWI economic think tank, said there was no getting away from the fact that German exports are diving.

'But this dive comes from an unbelievably high level,' he said. 'After this drop in 2009, there will be a recovery in 2010 because emerging markets will quickly develop further. For that, these countries need modern, and not old, investment goods.

'So Germany will continue to play a dominant role in supplying the world with investment goods, with plant equipment, with infrastracture,' said Mr Straubhaar, who is Swiss.

German firms could even gain market share in the long run. 'German industry has a very good chance to come out of this stronger against its competitors because the product range is broader and more competitive, and because German mid-sized firms have specialised very well in recent years,' he said.

BLG's Mr Kuhr also hopes the logistics group's investment will allow it to emerge stronger from the crisis.

'I am getting that on favourable terms,' he said. 'When things get going again, I am prepared.'-- REUTERS


5 facts about Germany's export sector

HAMMERED by a global slump, German exports fell sharply in December after a record decline the previous month, setting the seal on a quarter which economists say was probably a record contraction in Europe's biggest economy.

Following are five facts about Germany's export sector:

# Germany has been the world's biggest exporter of goods since 2003, though economists expect China to surpass it soon.

# At 184 billion euros (S$358 billion), cars and car parts accounted for the biggest chunk of German exports in 2007, the last full-year for which data is available. Machines came next followed by chemical products, and then metals and semi-finished metal goods.

# France is the biggest market for German exports, accounting for around 10 per cent of the total in 2007.

# A marked slowdown in exports dragged German economic growth to a three-year low of 1.3 per cent in 2008.

# The BGA trade association expects German export sales will decline by between 4 and 6 per cent this year.